Sunday, January 23, 2011

Verizon, FCC Net Neutrality Suit Is Bad News for All Sides: 10 Reasons Why

News Analysis: Verizon has decided to wage battle against the FCC over an already-weak rule protecting net neutrality. But neither side is going to look good in a legal tussle that could set back the cause of network neutrality, one way or another.
By: Don Reisinger

Net neutrality and the legal fight that surrounds it is something that can’t be explained so easily. In essence, the Federal Communications Commission believes that it has the power to establish some basic rules on user access to the Internet. Internet providers, however, feel that they can regulate themselves and that the intrusion of federal government officials into their businesses is simply unacceptable.

However, last year, Verizon (with Google) unveiled some solutions to the net neutrality debate that, it believed, would help solve the problem once and for all. Much to the surprise of those who have been following net neutrality over the years, the FCC adopted many of the ideas that Verizon first set forth last year. All seemed to be good.

But now Verizon has decided to challenge the FCC’s rules, saying that they are “contrary to constitutional right.” And further inspection reveals that neither party—Verizon nor the FCC—has made itself look good in this battle. Moreover, the entire net-neutrality debate is once again coming to the fore. It’s looking like just one big bundle of bad.

1. It’s basically Verizon’s idea.

If one compares what Verizon first proposed last year, and what the FCC eventually ruled on the topic of net neutrality, they wouldn’t find many differences. In fact, the only major difference between the two proposals was that Verizon’s option, which was done in tandem with Google, asked that the FCC not have “rulemaking authority.” That is something that the FCC largely ignored. But given the rest of the similarities, one might rightfully ask why Verizon is so upset about something that, if its previous proposal is to be considered, is something it should be quite happy about.

2. It makes Verizon look greedy.

Verizon’s decision to argue in court about the FCC’s net neutrality rules makes the company look greedy. It’s as if its first concern is its own financial health, which Verizon seemingly believes the FCC will negatively affect, rather than what might be right for the Internet. Admittedly, such a response isn’t much of a surprise, considering Verizon is a corporation with responsibilities to shareholders. But this latest lawsuit, right or not, makes it look greedy. And that’s something its PR team must address.

3. Was the FCC right in the first place?

Verizon’s challenge to the FCC rules prompts some to wonder if the government organization was right to offer up solutions to net neutrality in the first place. The FCC’s solution attempts to prevent service providers from blocking access to lawful content, services or applications. It also tries to stop providers from “unreasonably discriminat[ing] in transmitting lawful network traffic over a consumer’s broadband Internet access service.” But with Verizon’s latest suit, the debate now turns to whether the FCC should have the right to impose such restrictions on companies. Verizon certainly doesn’t think it should.

4. The court choice is suspect

If nothing else, Verizon’s decision to choose the same court that ruled in Comcast’s favor in a previous net-neutrality complaint and even request the same judges is something that doesn’t make the company look good. From a legal perspective, it’s the smart move, since Verizon has found a court that might be more sympathetic to its argument. But by potentially stacking the cards against the FCC, it looks like the bully. And that’s something it doesn’t need right now from a PR perspective.

5. What about the consumers?

Lost amid the conversation over whether the FCC or Verizon is right in their arguments on net neutrality is the consumer. What is really right for the average customer who is paying service providers fees every month for access to the Internet? The FCC believes it’s acting in the favor of the average U.S. consumer. But that’s debatable. Much of what has been said so far revolves around the power of corporations compared to that of government organizations. All the while, the consumer and the business customer are the pawns in that game.

6. Verizon can’t be trusted.

Verizon contends that it and the industry have the ability to manage themselves when it comes to net neutrality. But let’s face it: What have Verizon, Comcast, Time Warner Cable and the like done to earn that trust? ISPs are among the most disliked organizations in the world, and a key component in the entire net-neutrality debate whether to place even minimal regulation on their operation. Sorry, but until Verizon proves it can be trusted to do the right thing for consumers, it probably should be managed by some sort of higher authority.

7. The FCC can’t be trusted.

Of course, deciding which higher authority should manage Verizon is tough to say. As mentioned, the FCC’s rules regarding net neutrality are strikingly similar to those that Verizon and Google suggested last year. In light of that, some might be right to wonder if the government organization is really looking out for customers or simply giving them a few benefits without actually doing enough to change the state of Web access in the United States. Until the FCC can prove that it’s willing to dismiss corporate desire and offer something on its own, who knows if it can be trusted?

8. It’s a deregulation argument.

Over the past few years, as the Great Recession affected millions around the globe, the issue of “deregulation” became a hot topic. Folks on either side of the debate made equally compelling arguments as to why regulation is or is not necessary. Verizon’s argument against the FCC is one of deregulation, as well. The company and its competitors want to regulate themselves. But now some might wonder if the deregulation argument that has dominated the financial sector should start making its way to the Web.

9. It’s Comcast all over again.

Last year, the same court that Verizon has brought its suit to ruled in favor of Comcast in its own fight against the FCC. The court ruled unanimously that the government organization overstepped its boundaries by cracking down on the service provider for impeding some of its customers’ ability to access Web traffic. It was a ruling that was panned by many in the FCC’s corner, and it helped fuel the debate over net neutrality. This time around, Verizon is hoping to follow in Comcast's footsteps with a victory of its own. But unlike Comcast, which got a black eye over its court battle, Verizon must ensure that it doesn't come out of its own legal bout looking anti-consumer. Not only would it hurt the company from a brand-perception perspective, but being viewed as anti-consumer could push customers with alternative service options elsewhere. The risk simply isn't worth the reward.

10. It doesn’t push the solution forward.

Even after the FCC offered up its own solution for net neutrality, the debate over what needed to be done wasn’t over. But if nothing else, the FCC at least got the ball rolling toward some kind of solution. Realizing that, Verizon’s decision to start a legal battle over net neutrality isn’t helping matters much, and it could push a solution even further away. And those on both sides of the debate can agree that pushing a real solution away is something that just won’t work right now.

FCC Proposes Net Neutrality Rules, Reaction Rolls In
Not surprisingly, reaction has been rolling in from detractors and supporters alike. Here is a sampling of what people are saying.

Vint Cerf, chief Internet evangelist, Google
To some it may seem like an esoteric issue, but this boils down to protecting the Internet as an engine for innovation, economic growth, social discourse, and the free flow of ideas. Preserving non-discriminatory access also has the virtue of protecting consumer choice, ensuring that an Internet access provider cannot block fair access to any application provider on the Internet. We could not be more pleased to see Chairman Genachowski take up this mantle, and we look forward to working with the Commission as it finalizes its plans.

David L. Cohen, executive vice president, Comcast
We welcome the dialogue suggested by the Chairman in his comments, and we completely agree that any consideration of new "rules of the road" begin with notice and an open, public rulemaking proceeding - this is both fair and appropriate. But before we rush into a new regulatory environment for the Internet, let's remember there can be no doubt that the Internet has enjoyed phenomenal growth even as these debates have gone on.

Chris Guttman-McCabe, VP of regulatory affairs, CTIA, The Wireless Association
As we have said before, we are concerned about the unintended consequences Internet regulation would have on consumers considering that competition within the industry has spurred innovation, investment, and growth for the U.S. economy. As a justification for the adoption of rules, the Chairman suggested that one reason for concern "has to do with limited competition among service providers." This is at the core of our concerns. Unlike the other platforms that would be subject to the rules, the wireless industry is extremely competitive, extremely innovative, and extremely personal. How do the rules apply to the single-purpose Amazon Kindle? How does it apply to Google's efforts to cache content to provide a better consumer experience? How about the efforts from Apple and Android, Blackberry and Nokia, Firefly and others to differentiate the products and services they develop for consumers? Should all product and service offerings be the same?

Democratic FCC Commissioner Michael Copps
Chairman Genachowski's bold announcement today is a significant further investment in safeguarding Internet Freedom. I salute him for it. Broadband users should be able to use any device or application they want, to reach any legal content they wish, using any broadband technology, so long as they don't cause harm to the network.

Democratic FCC Commissioner Mignon Clyburn
I fully support Chairman Genachowski's intention to take affirmative measures to preserve the openness of the Internet. The Chairman's statement today is an important first step in setting forth clear rules of the road that will ensure the Internet's continued vibrancy. As a former small business owner, I am keenly aware of how an open and transparent Internet can serve as an equalizing force for new entrants to the marketplace.

Gigi B. Sohn, president and co-founder, Public Knowledge
"FCC Chairman Julius Genachowski struck exactly the right balance this morning when he announced a plan to require a free and open Internet. Consumers and communications companies will benefit from this policy proposal. Returning the Internet to its open, non-discriminatory character under the law opens up once again the greatest engine for economic growth, democracy and expression that we have ever seen.

Ed Black, president and CEO, Computer & Communications Industry Association
CCIA supports reasonable network management and even higher prices for top bandwidth consumers. Greater broadband capacity build-out and competition should be the ultimate goal, not private control of online activities. Adding nondiscrimination and transparency rules would provide reassurances that whoever controls the pipe will not also control content."

Ken Ferree, president of The Progress & Freedom Foundation
I'm troubled to learn that the FCC is embarking on an exercise that would probably result in rules that are unconstitutional and almost certainly beyond the FCC's statutory jurisdiction. Aside from the legal issues it raises though, I find myself at a loss to understand why the administration wants to start meddling with a sector of the economy that, despite a challenging macro-economic environment, is performing pretty well by any rational standard. What exactly is the problem they are trying to remedy? Should they perhaps wait until they have a "Broadband Plan" in place before they start changing the rules of the road for the market? It's almost as if they are trying to turn a story of success into one of failure. It's just not the sort of practical and pragmatic approach that one would expect from this new, data driven FCC.

Josh Silver, executive director of Free Press
The debate over Net Neutrality at times has felt like a marathon, but today the finish line is in sight. Chairman Genachowski's speech today shows the FCC intends to follow through on President Obama's pledge to protect the free and open Internet.

Matthew M. Polka, president and CEO, American Cable Association
If the FCC moves forward with its rulemaking, ACA urges the Commission to ensure that broadband content providers are similarly prevented from imposing closed Internet business models that are even more problematic today than the concerns raised about the ability of broadband access providers to distort various forms of Internet commerce and competition.

Markham Erickson, executive director, Open Internet Coalition
Our members support these changes because they understand that openness rules will bring new competition into the tech industry, stimulating growth, job creation and consumer choice. We look forward to a process to establish a legal framework around openness principles that will be clear, simple, effective, and cover broadband in all its permutations, including wireless data services.

Matt Wood, associate director, Media Access Project

Some Internet service providers claim that net neutrality represents a change from the past, but in reality these rules simply make permanent the bedrock non-discrimination principles under which the Internet arose and flourished. Carriers tend to talk out of both sides of their mouths on this issue. They argue that net neutrality is unnecessary because there is no unfair discrimination by providers, yet they complain that these rules will dampen investment in broadband by somehow changing carrier practices. They can't have it both ways, but Americans can and will have access to lawful content and applications of their choice if the Commission implements reasonable net neutrality rules.

Wayne Crews, vice president for policy, Competitive Enterprise Institute
"Net Neutrality" is an anti-competitive, pro-bureaucratic construction. The so-called "principle" of regulated non-discrimination is an incoherent abhorrence. It advances the aims of regulators and transitory special interests, not consumers. Worse, the expansion of neutrality rules endangers wireless networks that have yet to be created. Neutrality policies set the healthy functions of infrastructure and content innovation against one another, spurring harmful tensions and distorting what would otherwise be the complementary growth of both sectors.

There are potential risks to Net Neutrality. The most prominent are claims that once Net Neutrality is in effect the broadband providers will have no incentive to invest in their networks and will not be able to fight piracy. We believe that in a competitive market the motivation for investment will continue to exist and that the best way to fight piracy it to offer an easy to use and affordable legal alternative. It seems, however, the risk of inaction on Net Neutrality is greater.

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